Russia ratchets up gas pressure on Ukraine with pre-payment demand

Russia’s Gazprom is demanding the equivalent of 1.2 billion euros from Ukraine as pre-payment for natural gas deliveries in June.

The state-controlled energy firm said it wants the cash by June 2.

The bill ratchets up a dispute over prices that is pushing the two countries closer to another gas war that could cut supplies to Europe.

That came as the Ukrainian Prime Minister Arseny Yatseniuk urged Moscow not to use gas as a new type of weapon against Ukraine.

“We are ready for a market-based approach and Russia is to stop using natural gas as another, or a new type of Russian weapon,” Yatseniuk told a news conference with European Commission President Jose Manuel Barroso in Brussels.

Barroso echoed those comments.

Kyiv – which wants to renegotiate a contract that locks it into buying energy at a very high price – says Moscow is using gas as a political tool to punish Ukraine’s new leaders for moving closer to the European Union.

That contract from 2009 charges $485 per 1,000 cubic metres of gas – the highest price paid by any client in Europe. It also commits the Ukrainians to buying a set volume, whether it needs it or not.

Moscow dropped the price to $268.5 after then-President Viktor Yanukovich turned his back on a trade and association agreement with the European Union last year but reinstated the original price after Yanukovich was ousted in February.

Ukraine’s energy minister has said they will take Gazprom to court if the two sides failed to agree on price by May 28.

The court procedure has been used by Gazprom’s other clients in Europe to win price cuts over the last couple of years.

Gazprom has said Ukraine currently has only half what it needs in storage to ensure a trouble-free winter.

Twice in the past decade, price disputes have led to reduced supplies of Russian gas to European clients via Ukraine, a conduit for nearly half the gas Europe imports from Russia.